Saturday, 29 December 2007

Mr KP Singh, Secretary for Defence Production, will retire from service on 31st December 2007. His three years in the Ministry of Defence (MoD) have seen major policy changes, flowing from the decision in 2001 to allow the private sector into defence production, subject to licensing and an FDI cap of 26%. There is speculation that Mr KP Singh might go on to head a new regulatory body that is being set up to manage offsets for the MoD.

Q. Mr KP Singh, how do you look back on your tenure as Secretary, Defence Production?

The Department of Defence Production, and the companies and organisations that work under its supervision, have done a wonderful job in meeting some of the crying needs of the defence forces. There have been lacunae, there are gaps, and there are areas in which we have not been able to achieve what we should have. But the reasons for that do not lie entirely within this department. Take, for example, providing the army with the155 mm (medium artillery) gun. By now we should have been up and running in meeting the requirements of the Indian armed forces. But unfortunately, because of certain problems with the foreign company which was to have given us the technology (South African company, Denel, which was banned after an investigation was launched in South Africa for corruption in an arms contract to another country), that process of buying 155 mm guns has been stalled. So unfortunately we lost that opportunity and that gap still continues to be felt.

Q. The post-2001 liberalisation in defence production has been likened to the 1991 opening up of the Indian economy. What do you see as the major landmarks of your tenure?

Defence Production must ensure that at least 30-40% of the military’s equipment remains at the cutting edge. To do this, we first changed the licensing policy in 2001. The next major reform came when the MoD amended the defence acquisition procedure and laid down a “Make” procedure for defence equipment (in Defence Procurement Procedure - 2006, or DPP-2006). This allows us to select a company, or a consortium of companies, and give them a (defence) programme to develop. This requires an enormous budget, which the private sector could not afford, since there is never a certainty that the military would buy the end product. But now, 80% of the R&D funding for that project can be financed from the defence budget.

Q. But for that, the private companies have to be notified as Raksha Utpadan Ratnas (RuRs), and that announcement has been held up in the MoD.

The policy doesn’t say these companies have to be RuRs. But in countries like India, you cannot do these things by pick-and-choose. There has to be a procedure by which you select a band of deep-pocketed companies, whose track records show they are good in R&D, who have the technical manpower for R&D. And that is why a group of RuRs are being selected, which can be entrusted with these vital R&D projects.

Q. But the nomination of RuRs has been stalled. It is believed that Left-backed trade unions of Defence Public Sector Undertakings (DPSUs) have held back the Defence Minister, because they fear competition from the private sector.

In a democratic society, where you have a parliamentary system, ministers always have such compulsions… let me tell you, there is total unanimity in the MoD that these are good decisions, they are good steps and we ought to take them.

Q. When will the RuRs be announced?

Sooner or later they will be… because they are good for the country in the long run. Unions will be made to realize that by suffocating a department, you cannot progress. You have to open it up so that energies of the Indian private sector are also made to play an active role in meeting the requirements of the Indian defence forces. There is space for (the DPSUs, the Ordnance Factories as well as the private sector).

Q. One of the basic conundrums of Indian defence equipment planning is that we are constantly trying to put in place a set of procedures that remove all subjectivity, and make decision-making completely objective. But a lot of defence decisions are inherently subjective; they can never be entirely objective. And since MoD officials are reluctant to make hard subjective judgements, decision-making slows down. (Former Defence Minister) George Fernandes has spoken about bureaucrats’ fear of the “Three Cs” (the CVC, the CAG and the CBI)

Subjectivity cannot be scoffed at, or wished away. But subjectivity is of many types. There can be 100% subjectivity, there can be 20% subjectivity, and there can be 5% subjectivity. Any decision that anyone makes --- even something as simple as which medicine to take, which antibiotic to take, what quantity to take --- is also subjective. So subjectivity will always be there.

Q. But this insistence on procedures that are completely objective, and in accordance with a rulebook, has resulted in decision-making paralysis in the MoD, hasn’t it?

Let me tell you, there is no decision-making paralysis. There are genuine fears that if there is a wrong thing done --- supposing some company has been caught doing some underhand dealings that are not as per our procedures --- obviously there is a big question mark over dealing with that company. But our big quandary is: at what stage should you take the decision not to deal with that company. In some cases, e.g. the recent decision to order re-tendering for the army’s light helicopters, there is no problem. Since the order had not been placed, we could simply order re-tendering. But there are cases when you have gone ahead and placed the order, and then you come to know --- either through your channels, or through some investigative agencies --- that something really objectionable has happened. In that case, the decision to cancel the order sometimes has an impact on the Department of Defence Production, because often technology has to be taken from the vendor in order for production to start. So the whole process gets stalled. These are some of the hiccups, but in a sensitive area like defence, there are no shortcuts to success and we cannot say we need an environment in which whatever we say is right.

Q. There are other democracies. The UK, France, all these countries make the hard decisions of defence.

In those countries also, they sometimes reach a stage where they are bogged down with something or the other. There are concerns.

Q. It has been mooted that we need a completely autonomous Department of Defence Procurement.

No, I don’t agree. You don’t need an environment that absolves you from all responsibility. It never works. I personally think our systems are very good, decision-makers are decisive, and whatever best is to be done for the defence forces, the minister and secretary and the service chiefs also, they take the right decisions.

Q. The other important policy area that suffers from gridlock is offsets policy. Many prospective vendors, particularly those who will bid in March 2008 for the Medium Multi-role Combat Aircraft (MMRCA) contract, are waiting for changes which, they have been told, are coming soon.

Offsets policy is already in place… and there is no reason why MMRCA vendors have to fear that indecision on the offsets front will bog them down. What they are looking for are policy changes. We have to see whether the policy changes demanded by them are good for us. Those policy changes may be good for Chile, or for Poland, but not good for India. (On the other hand), some of those changes are worth implementing. So we are in the process of making decisions for bringing about changes to the offsets policy, which we think are in the long run good for running this offsets business. These decisions are in the final stages of being taken, and when they are taken, there will be amendments to the offsets procedures.

Q. But there is a March 2008 deadline, when the MMRCA bids must be submitted. For example, if you allow Transfer of Technology (ToT) to be counted as offsets, that will make a substantive difference to the way vendors’ bids are structured and submitted. So the vendors’ requests for early decisions are not unreasonable.

These are unfounded fears, in my opinion. When we ask for bids, we clearly spell out in the Request for Proposals (RFPs) what is required from the bidder. Sometimes we may ask for a product in “fly-away” condition, i.e. totally built. In such cases, no ToT is required, or sought. In other cases, we may want to build the aircraft, and we want maintenance ToT or production ToT. In that case, our RFP asks for specific technologies, and the vendors put a price on it. Nobody gives technology gratis… it comes with a price. Either you give them barter in offsets, or you pay hard cash for that technology.

Q. Are you saying that the changes in the offsets policy, as and when they are announced, will not be of a nature that will affect the bids and offsets proposals of the bidders.

The type of policy we have made, towards which I am a great contributor, has brought great dividends. The first big thing we have done in the offset policy is that the foreign vendor is not being guided by any authority to select an offsets partner. We’ve given freedom to the offsets bidder to select his partner. In the field of aeronautics, we have made an exception. In the MMRCA programme, we have said that technology will be given to HAL. That is primarily because there is no other aeronautical capable company in the country today who can produce a fighter jet. There is only HAL. That is why an exception has been made in this case. In other cases (such as the offsets for the Medium Range Radar), you’ve seen Israeli company (ELTA) select L&T and Astra Microwave as its offsets partner. It is entirely the due diligence of the foreign vendors that has brought them to this choice. It’s a great choice: from the whole firmament of Indian public and private industry they can choose their own partners, who can give them (products) at the right price and the right delivery schedules.

Q. Have we considered the laws and regulations on the foreign vendors’ side? For example, there are foreign laws and regulations that do not allow the transfer of high technology to a company in which the foreign company holds only 26%, which is the maximum that they are allowed.

Defence is an area in which it is inappropriate to increase foreign holding beyond 26% for various reasons. But, in some exceptions, like for the JV with Russia to manufacture the Multi-Role Transport Aircraft (MRTA), we have gone to the cabinet and obtained dispensations. HAL and French company Snecma were allowed to form a 50-50 partnership for manufacture of aircraft engines. Brahmos missiles are manufactured by a 50-50 Indo-Russian partnership. Similarly, if high technology is offered to India, and if 26% (foreign equity restriction) is an impediment, we can consider increasing the foreign share to 50%, depending upon the importance of that technology. We are willing to take the extra effort of going to our highest policy-making bodies and getting the approval for that.

Q. Currently, offsets are handled by the Defence Offsets Facilitation Agency (DOFA), which is neither equipped, nor staffed, to undertake such a huge job. In just the MMRCA contract, they will be required to evalute $30 billion worth of offsets proposals --- six vendors, each submitting $5 billion worth of offsets proposals. How can DOFA, in its current form, handle all of this?

We are already in the process of understanding the ramifications of this whole responsibility. And we are very much in the process of creating a body, which will have the wherewithal to cope with the workload that offsets are going to throw up. A committee has been set up to understand the problems and to sort them out. There is unanimity in the MoD that neither DOFA, nor the Director General (Acquisitions) can handle such a large volume of independent work. So an exercise is going on to identify a suitable structure for this.

Q. What timeframe are you looking at for announcing the new body?

Very shortly. 15-20 days… one month, maximum.

Q. Are you going to require legislation to be passed in parliament for this?

Maybe. But it may not be required.

Q. Will private industry, or foreign vendors, have a place in this body?

This is a purely MoD housekeeping function, keeping track of those (offsets) investments. The projects that are set up will have to produce and export for five or ten years. We have to keep track of how much they have exported, how much they have banked, how much they are carrying forward. This will become a major housekeeping function. And then there will be grey areas sometimes. Policy will need to be interpreted. In addition, there will be certain cases that fall outside existing policy… so decisions may have to be taken about how to deal with such cases. This organisation will play a very important role in advising the government what is in the best interests of the country. But foreign vendors and private companies --- they have no role to play in this body.

Q. Another key amendment to the offsets policy, which vendors are waiting for, is the announcement to allow offsets banking. When is the MoD going to announce it?

It will happen. Some of the vendors’ suggestions (on offsets policy changes) are worth following, we realise that. There is unanimity in the MoD that we should allow ToT and offsets banking, and we will. These things take time to implement, and there is a desire not to announce changes piecemeal, but to announce them all together. A holistic decision will be taken very soon.

Q. There is a suggestion that grassroots defence industry must be built up by stipulating a percentage of offsets that must go into defence R&D or small and medium enterprises.

No, we have no such stipulation in our offsets policy. Social justice, or the development of industry is not the role of this ministry. We are willing to build up any industry that can play a meaningful role in defence.

Q. Evaluating the technology that we are offered under ToT… that’s a problem that the MoD is grappling with.

Evaluating technology is a very important aspect. And you have to select your best people who are capable of assessing technology. The DPP-2006 has laid down that in all such matters, a committee under DRDO will make a recommendation as to what shall be the treatment given to a particular technology item.

Q. Is there a proposal to formalise that in the shape of a Defence Technology Procurement Board?

It is already formalised. The RM has approved this procedure.

Q. What about in a more pre-emptive way, by laying down that these are the technologies that we should be looking for through offsets, when we procure some equipment.

I already mentioned that each RFP, which is the starting point for procuring an item, clearly spells out which are the technologies that India is interested in buying.

Q. Other than the technologies that are related to a contract, there are other critical technologies that India might need, e.g. materials technology, fundamental science, etc. India might want to obtain those through the opportunities that offsets provide.

You cannot ask the vendor to give you what he does not have himself. The vendor who is supplying you, say the MMRCA, does not develop the materials technology. He buys it from some third party. You cannot place on him the obligation to give you that. What we require, we have to search it out ourselves. Nor are such technologies freely available; most countries restrict them. There is a continuous effort to get those technologies. If we are not getting it, there are obviously other factors.

Q. So something like a High Level Technology Steering Committee… you don’t envisage something like that.

There is a very high level committee like that under the DRDO. It will become a standing committee when cases like this will come. The committee is there.

Q. There is also a suggestion that the MoD could have an Offsets Fund, which could subsidise high risk R&D and SMEs. Vendors would be permitted to contribute to this fund as a means of discharging a laid down percentage of their offsets obligations.

We have no desire for such an option. We have a separate budget for our own R&D. This must be an idea in the minds of vendors. These are all short-term concepts for discharging offsets obligations. Offsets obligations cannot be discharged through contributions to funds; they will have to be discharged the hard way, through direct investments into defence production.

Q. Finally, the rumour is that, after you retire, your expertise as one of the architects of the offsets policy will be utilised by appointing you to head the new expanded DOFA.

I am very satisfied with what I’ve achieved in Defence Production. I am not seeking anything more.

Q. Are you saying that you will not head the new offsets organisation? Do you rule it out?

India’s Ministry of Defence (MoD) is looking for ways to handle the huge business from offsets that will soon flow into the country. On 9th June 2008, the handful of officers in the Defence Offsets Facilitation Agency (DOFA), the MoD body responsible for offsets, will find itself evaluating offsets proposals worth about Rs 1,20,000 crores. These will comprise of proposed joint ventures between a multitude of Indian companies and six global vendors vying to sell India 126 Medium Multi-Role Combat Aircraft (MMRCA).

In order to handle this workload, and other proposals that will continue to arise from future contracts, the MoD is dramatically expanding DOFA. Secretary for Defence Production, Mr KP Singh, has told Business Standard that a high-level committee has worked out what DOFA will need to include, and the announcement will take place within one month.

Mr KP Singh says, “There is unanimity in the MoD that neither DOFA, nor the Director General (Acquisitions) can handle such a large volume of independent work. So an exercise is going on to identify a suitable structure for this”.

The expanded version of DOFA, according to the Secretary Defence Production, will perform the following roles:

• Keeping an account of the fulfilment of the offsets contracts, including the value of defence products manufactured, and exported, and the offsets liability carried forward each year.

• Once offsets banking is permitted, DOFA will perform the role of the bank, keeping a track of the offsets banked, encashed, and carried forward.

• When grey areas exist in the policy, the expanded DOFA will interpret and provide policy clarifications.

• When certain cases fall outside existing policy, decisions on those cases will be made by the expanded DOFA.

Private defence industries, which will be playing a major role in offsets production, have been lobbying for a role in the expanded DOFA. The MoD, however, has ruled out including the private sector. The Secretary of Defence Productions says, “This organisation will play a very important role in advising the government what is in the best interests of the country. But foreign vendors and private companies --- they have no role to play in this body. This is a purely MoD housekeeping function.”

The expanded DOFA will include a technology evaluation cell, consisting of Defence R&D Organisation (DRDO) personnel, a legal cell that is qualified in law relating to commerce and foreign trade, and a greatly expanded accounting capability in order to keep continuous track of individual offsets liabilities that are discharged over several years. The MoD is considering boosting DOFA’s accounting capability by sidestepping three Joint Secretaries from the Ministry of Defence (Finance), a department which has a comparatively smaller workload.

It is still unclear whether the expanded DOFA will continue to form a part of the Department of Defence Production in the MoD, or whether it will evolve into a separate regulatory-cum-advisory body, in which case a legislative framework will have to be enacted.

It is also unclear who will head the new body. While outgoing Secretary of Defence Production, Mr KP Singh, is being mentioned as one possibility, there is another viewpoint that argues that DOFA should remain within the MoD, under the Director General (Acquisitions).

Tuesday, 18 December 2007

The Ministry of Defence’s (MoD’s) announcement earlier this month scrapping the proposed purchase of 197 light helicopters from European consortium, Eurocopter, provides an excellent mirror for India to examine its strategic fibre. Comment and public attention has largely centred around the procedure of the trials, the personalities and relationships involved, and whose footfalls trod more heavily in the corridors of South Block: Eurocopter’s or its arch rival Bell Helicopter’s.

But the twenty-odd jawans, clinging through winter onto Sonam Post, perched on a knife-edged ridge in the Northern Siachen Glacier, haven’t yet heard about this decision. They will learn about it one of these days, via a three-weeks-old newspaper that will be delivered to them in a 1960s vintage Cheetah helicopter, flown by an Army Aviation pilot who flies the world’s most hazardous missions to earn 20,000 rupees a month.

For those jawans, and for tens of thousands others like them who have already been cut off by the snows, this decision means a clear reduction in chances of survival. Between now and May, Indian jawans in these posts will die of illness, accidents and high-altitude sickness, because a helicopter could not evacuate them to a hospital. The arrival of either the Eurocopter or the Bell --- newer, more powerful and capable helicopters --- would have quickly translated into saved lives.

But saving soldiers’ lives played no role in the decision. What did was a corrosive melange of political influence, bureaucratic risk-aversion and convoluted procedure, which now unacceptably smothers every major defence decision. The cancelled purchase from Eurocopter had taken six years to fructify. Whether another selection procedure will end in a perfectly objective decision is already well known: it will not. Military procurement decisions cannot be reduced to a mathematical matrix; they involve subjective considerations that cannot be disregarded.

But for ministers, parliamentarians and bureaucrats, with little idea or experience of the issues attending defence, the one guiding principle is: play it safe. Bureaucrats will confide, over a scotch and soda at the Gymkhana Club, that not one of them has been hauled up for a decision not taken; but too many good men have fallen victim to valid decisions that went against them. George Fernandes, whilst serving as defence minister, bemoaned the perpetual paralysis of South Block’s babus.

Comptroller and Auditor General (CAG), MK Kaul, has publicly excoriated MoD officials for avoiding risk by using rulebooks to delay defence purchases. The CAG told an international seminar on 15th Dec 06, “The emphasis seems to be on technical compliance through a multitude of detailed rules and regulations rather than on creating a new organisational culture, which focuses on results.”

Fernandes was wrong in blaming the paralysis on the three “Cs” --- the Central Vigilance Commission, the Central Bureau of Investigation and the Comptroller and Auditor General (CAG). The rot runs deeper than the mere inability to provide for defence. It has incapacitated the fundamental process of even planning for it.

India is the only major country that plans its defence one year at a time. The MoD theoretically has a 15-year Long Term Integrated Procurement Plan (LTIPP), the basis for all defence procurement, modernisation, and indigenous development of equipment. From the LTIPP, which was to cover the period 2002-2017, were to flow the 10th, 11th and 12th defence 5-year plans, covering the same period. The astonishing reality is that these plans do not exist.

The CAG’s Report No 4 of 2007 reveals that the LTIPP 2002-2017 was only finalised in 2006, four years after it was supposed to have commenced. By then, since it was the last year of the 10th defence plan, it was decided to prepare a revised LTIPP, covering the period till 2022, all the way to the end of the 13th defence plan, which is to run from 2018-2022.

Now that is facing further delays as the MoD reworks everything. The MoD has told the 14th Lok Sabha Standing Committee on Defence (in writing), that the new LTIPP would now be finalised only in 2009. The 16th report of the Standing Committee carries the MoD’s reply.

The MoD submits that, “The revised LTIPP (2007-22) is being prepared following a deliberate and integrated ‘Top Down’ approach by articulating National Security Strategy, National Military Strategy, National Military Objectives/Capitality (sic) and so on. Such an exercise has been undertaken for the first time and is an extremely involved process with inputs from the three Services, MoD, NSA and various other agencies. The document is expected to be ready by December 2009.”

So the revised LTIPP (2007-22) is already late by two years and, going by track record, will be delayed even further. Medium-term planning is doing no better. The CAG’s Report No 4 points out that the 11th Defence Plan, which covers the period 2007-2012, and which commenced on April 2007, still awaits formal approval.

The MoD bureaucrats are blaming their counterparts in the Finance Ministry, who are apparently sitting on the file. But the bottom line is that no long-term or medium-term defence plan is in place, no targets are set for bureaucrats to procure desperately needed equipment, and little can be hoped for from the large and inefficient government-owned defence industry.

If those jawans on Sonam Post were not from the Indian Army, they might well be wondering which side is the enemy.

Friday, 14 December 2007

Cracks in the India-Russia relationship are becoming increasingly difficult to paper over. In October, India faced a snub when foreign minister, Pranab Mukherjee, on a visit to Russia, could not secure a meeting with his Russian counterpart. On 3rd December, India’s navy chief, Admiral Sureesh Mehta, publicly questioned Russia’s new priorities, suggesting frankly that new oil wealth could be generating a world-view in Moscow that was different from when New Delhi largely funded Russia’s defence R&D.

It remains unclear whether the admiral had the government’s okay to pronounce on foreign policy, but he only stated a fact. After the Soviet meltdown, Russia’s military spending plummeted to one-thirtieth of what it was in 1989, when 2.03% of the Soviet Union’s GDP was being spent on R&D. Russian analysts estimate that by 2000, India may have been funding 50% of all Russia’s military R&D. This was done by ordering a range of weaponry --- T-90 tanks, Talwar class warships, Sukhoi-30 fighters, MiG-21 upgrades, and a range of missiles --- and letting Russia develop those products using Indian money.

Things, however, have changed dramatically. From 2007-2012, a resurrected Russian State Armaments Programme will spend US $50 million on military R&D. As Russia’s military places long-postponed orders for weaponry, that country’s scaled-down defence facilities are unable to fulfil foreign contracts. Senior Indian diplomats point out that Russia’s military modernisation programme meant that the Gorshkov over-runs were inevitable.

The problem is not just India’s. China, too, must deal with a commercially resurgent Russia. Beijing had signed, in 2005, a $1 billion order for 34 giant IL-78 transport planes and 4 IL-78 refuelling aircraft. Now Russia has realised that it cannot meet its own as well as Beijing’s requirements. That contract is being renegotiated at a higher price.

India, says a senior official with extensive experience in the Ministry of Defence (MoD), has no choice but to deal with the new Russia. Declaring that the navy chief should not have criticised Russia, the official observes that, “The services may feel frustrated by occasional irritants in an extensive defence relationship. But when the navy needs help in designing a nuclear submarine, or wants to lease one to train crewmen, which country other than Russia is willing to help?”

The changing military relationship also reflects larger geo-strategic changes. A top diplomatic source points out, “The Soviet-India relationship can never be recreated, since that rested on a shared threat from China. Today, Russia has a benign relationship with China; in fact China buys more Russian arms than any other country in the world.”

And even that is changing. In 2006 and 2007 a host of small countries that buy big have supplanted China. Algeria was Moscow’s biggest customer last year, signing a $7.5 billion order for a basket of weaponry. Venezuela spent $3 billion on Russian arms; Malaysia, Indonesia and Vietnam each bought up a billion dollars worth of Russian arms.

Despite that, there are important Indian interests, says the senior diplomat, which can never be achieved without Russian cooperation. He points out that, “India wants to expand its footprint in the energy-rich Central Asian region. It cannot do so without Russian blessings. If India is a player in the Shanghai Cooperation Organisation, it is thanks to Russia’s help. India’s long-term energy interests are closely linked with Russia.”

New Delhi’s struggle to generate warmth in an old marriage is not made easier by a new suitor, Washington. Despite those blandishments, key decision-makers in South Block still believe that the India-Russia relationship must be defined by political common ground --- e.g. Russian backing for India as a permanent member of the UN Security Council, and its support in the Nuclear Suppliers’ Group --- rather than on disagreements in an arms supply relationship that must eventually be anchored on commercial logic, not political patronage.

At a time when US attention is focused on securing Pakistan’s nuclear arsenal, India has taken a giant step towards creating a missile shield that can shoot down incoming nuclear-tipped rockets while they are too far away to do serious damage. India’s Defence R&D Organisation (DRDO) today announced that it would conduct a full-scale test of a two-stage anti-ballistic missile (ABM) system by June 2008.

If that test is as successful as the last two tests on 27th Nov 06 and 7th Dec 07, vulnerable Indian cities like New Delhi will soon be protected by missile units, putting a serious question mark over Pakistan’s ability to strike the Indian capital. It was this Pakistani threat during the Kargil conflict in 1999, and again when Indian forces were deployed for war after the parliament attack in December 2001, that held back India from full-scale war.

The DRDO announcement follows a successful test last Friday off the Orissa coast, in which a DRDO interceptor missile shot down a simulated enemy missile. The “enemy” missile was actually an Indian Prithvi missile that was fired by the army. Today, Mr VK Saraswat, the DRDO’s Chief Controller of Missiles and Strategic Systems showed journalists a video recording of the missile test. While the “enemy” missile was still 15 kilometers above the ground, and barrelling towards its target at a speed of 2 kilometers per second, the DRDO interceptor missile smacked into it, breaking it into debris.

In the first test in November last year, the interceptor missile had brought down the “enemy” missile while it was 78 kilometers above the ground. The DRDO says that the complete ABM system, which will eventually protect important Indian targets, will combine both systems: one set of interceptors will be fired to bring down the incoming rocket at altitudes of about 80 kilometers. if it survives, another set will target it at altitudes of about 15 kilometers. The former is termed an “exo-atmospheric” interceptor, the latter an “endo-atmospheric” one. The former has been christened “Pradyumna” by the DRDO. The latter will soon get a name.

Mr VK Saraswat pointed out that India’s nuclear doctrine stipulates “no first use” of nuclear weapons. That gives any enemy the first chance to target India with nuclear strikes. India, he said, must therefore have the means to protect itself against that first wave of nuclear attacks.

The DRDO’s high profile Guided Missile Development Programme (GMDP), which set former president APJ Abdul Kalam on the path to fame, has had a patchy record. While the Prithvi and the Agni ballistic missiles can arguably be termed successes, the medium range Akash and Trishul missiles have not yet proved successful. The new ABM system was not originally a part of the GMDP.

When asked how the ABM system had overcome the problems that continue to plague the Akash and Trishul programmes, Mr Saraswat told Business Standard that the new ABM missiles had homing heads that sensed the targets and took the interceptor missiles towards it. They did not use the Akash and Trishul missiles’ technically problematic “command guidance” method, in which radio signals are sent from a ground station to guide the missile towards the target.

ABM systems are controversial; strategists argue that they destabilise nuclear deterrence by giving one country the ability to ward off nuclear strikes, thus encouraging it to attack. Cold War adversaries, America and the Soviet Union, signed an ABM Treaty in 1972, undertaking not to develop ABM systems. Mr Saraswat, however, defended India’s coming ABM shield, saying, “our ABM system is a defensive posture, not an offensive posture.”

Friday, 7 December 2007

At the Mazagon Docks Ltd (MDL), in Mumbai, there is a palpable sense of accomplishment as the shipyard approaches the finishing stages of the cutting-edge Project 17 frigate-building programme. By June 2008, the first of three 4900-ton, Shivalik class stealth frigates will commence eighteen months of trials with the Indian Navy. The second Shivalik class frigate will start trials by December 2008, followed by the third. Simultaneously, Project 15-A, for three massive 6700-ton Kolkata class destroyers, is making rapid headway.

But the sense of achievement is accompanied by uncertainty about the future. Even while a shortage of Indian defence shipyard capacity has forced the navy to order three costly Krivak class frigates from Russia, construction berths at MDL will lie empty from next year. No new orders are forthcoming because the Ministry of Defence (MoD) is still going through a lengthy decision process about what warships to build, and a sanctioning process that has historically taken at least two years.

The MoD recognises this bottleneck but seems unable expedite matters. Delays in the procurement of Scorpene submarines had resulted in the submarine fabrication line at MDL lying idle for almost a decade. Secretary for Defence Production, Mr KP Singh candidly admits, “the MoD was the bane of that yard (MDL). We had cancelled the order on submarines and not decided on the next order for 7-8 years. For that duration, 50% of the shipyard was waiting for that order to come. You can imagine, what do workers do? Workers leave.. the best welders left at that time. Today you have to train welders.”

Even if the next line of warships are ordered from MDL this year (a highly optimistic proposition) construction berths will lie idle for at least a year, while the shipyard goes through an eighteen-month period of evaluating what materials it needs and placing orders for those.

Vice Admiral SKK Krishnan, Chairman MDL explains that he should have already had the next order in hand, because, “It’s not as if an order is placed today and I start construction tomorrow. There is a large amount of commercial activity. It takes you six months to get cabling, and nothing less than two years to get the shafting and propellers of a warship. The time for building is also dictated by the availability of engines. There is such a tremendous demand for ship engines that Wartsila and MAN, the biggest makers of diesel engines, are booked solid till 2013.”

But while the MoD is trying to decide on its next order, it is hoping that MDL will build large corvettes for the navy. These are smaller ships than the frigates and destroyers that MDL is equipped to build, but would at least keep the shipyard’s construction lines going. Mr KP Singh says, “They are almost as big ships as what (MDL) is doing today. The order has not been placed as yet, but it will be placed shortly.”

But the shipyards find inexplicable the MoD’s lack of long-term planning and forecasting. India’s warship requirements can be mathematically predicted by considering naval expansion plans and the likely dates of decommissioning of ships that are completing their service lives. It effectively boils down to one frigate every year and one destroyer every two years. Admiral Krishnan notes that it is not difficult to place orders on the three defence shipyards accordingly, catering for a sufficient lead-time to build the ships.

The MDL Chairman points out that, “The defence expenditure budget is predictable, keeping in mind increments and inflation. So it’s easy to manage the fund flows. All countries do this exercise. They can all cite their capital acquisition plans five years in advance.”

For several reasons, both political and bureaucratic, this is not yet a part of India’s defence planning. That leave a defence shipyards, like MDL, which is reaching the end of a warship-building programme, with little option but to occupy itself with building commercial ships. But the highly specialised skill sets that go into building warships remain unutilised until the next order is placed by the MoD.

Thursday, 6 December 2007

For decades, the three public sector shipyards under India’s Ministry of Defence (MoD) have laboured to meet India’s warship requirements in facilities that gradually withered away due to a shortage of capital for modernisation. Profits for the three --- Mazagon Docks Limited (MDL) in Mumbai, Garden Reach Shipbuilders and Engineers (GRSE) in Kolkata, and Goa Shipyards Ltd (GSL) --- have been pegged at a fixed rate of 7.5% on the vessels they construct.

Whatever little modernisation has been implemented was funded through the warship building projects that the shipyards were allotted. Mazagon Docks, for example, is currently upgrading facilities with Rs 423 crores, which was budgeted within three ongoing projects at the shipyard: the Project 15 Kolkata class destroyers, Project 17 Shivalik class frigates, and the Scorpene submarine project. These funds, naturally, came with tight conditions on where they could be spent, leaving little to the discretion of the yard management.

That, however, is about to change. The MoD has sanctioned the raising of profits from 7.5% to 10% of turnover. A high-powered committee headed by the Secretary, Defence Finance, proposed this raise; the Secretary Defence Production and the navy’s Controller of Warship Production and Acquisition were also a part of the committee. The Defence Minister has okayed the proposal and the MoD will be issuing formal orders soon.

Secretary of Defence Production, Mr KP Singh, told Business Standard, “There is no hold up, and the Defence Minister has approved the increase. The drafting of the order is taking time because we want to study the previous orders properly.”

The increased flow of funds will provide the defence shipyards with a greater ability to manage their own modernisation. In 2005-2006, MDL made a net profit of Rs 60 crores; that rose to Rs 168 crores in 2006-07. Now, with the profit margin being enhanced to 10% on what will be a higher turnover this year, MDL could get as much as Rs 200-225 crores next year for its own modernisation schemes. Since GRSE and GSL are smaller yards, their profits rises will be correspondingly smaller.

The shipyards say that accruals through profits make for more stable and predictable modernisation than funds being sanctioned through warship building projects. Vice Admiral SKK Krishnan, Chairman MDL says, “We need to modernise the shipyard on a regular basis. Instead of Rs 423 crores through three projects, it would have been better to get Rs 40-50 crores annually for ten years.

The increase in shipyard profits will come primarily from the naval budget. With the three Kolkata class destroyers costing about Rs 2800 crores each, the 2.5% raise in profits would translate into a hefty Rs 210 crore rise in the cost of such a project. The navy, therefore, has insisted that profits will be increased only if the shipyard meets strict conditions, such as cutting down on ordering time and reducing the wastage of steel.

Admiral Krishnan explains that, “A cost-audit department of the MoD identified about ten different attributes that affected the cost of shipbuilding. In each one we said, this is our current figure over the last two years, and this is how we will improve our efficiency. Linkages were laid down between improving upon our efficiency, and our profit margin. So now we can claim more than 10% profits if we can match up to those expectations.”

The navy, for now, has accepted the shipyards’ contention that paying more for its indigenously produced warships will translate into modern shipyards that will cut down the cost of ships in the long term. Vice Admiral Birinder Randhawa, until last week the navy’s Controller of Warships Production and Acquisition says that all the infrastructure built so far through previous warship building projects will be considered Phase I of the shipyards’ modernisation plan. The modular shipbuilding facilities that the three MoD yards are now going to implement, with a global partner who is being selected, will form Phase II of the modernisation.

Wednesday, 5 December 2007

A missile can sink a warship, but a delay can sink an entire warship programme. A major bottleneck in the navy's surge towards indigenously building all its warships is the long time being taken to design the vessels. On 26th November, Defence Minister AK Antony told parliament that design delays were the biggest drag on the warship programme.

Design delays stem from a Catch-22 situation. The navy says that the shipyards take so long to build warships that new technology comes in, forcing a redesign to prevent ships being obsolescent even before they are inducted. The shipyards counter with the argument that constant redesign by the navy delays shipbuilding unacceptably. Today, largely because of constant redesigning, India takes almost ten years to build a warship and introduce it into the fleet.

But now all this could change with the dockyards going global. At Mazagon Docks Ltd (MDL) in Mumbai, the Chairman, Vice Admiral SKK Krishnan, told Business Standard that a search has been launched for an international design partner with which MDL will set up an internationally registered private joint venture (JV), that will not just design warships but also function globally as a private design centre.

Admiral Krishnan says, "We have made a shortlist, we are employing a consultant who will help us to form the JV. There must be something in it for the other company as well. So it will be a Design Centre… we will design warships for India, but the JV partners can also bring back-office work from their country…. Any marine structure, any marine design. They will have the computer capability to do any design, and we can do the nitty-gritty of the design work here."

The process of design is currently a complicated one. When the navy is sanctioned a new line of warships (typically 3-6 vessels), naval designers first produce a "conceptual design" and then a "functional design". These lay down broad outlines, e.g. the number of decks, the positioning of weapons and the general layout. Based on that, the shipyard produces a "detailed design", which is comprehensively vetted by the navy, a complex and time-consuming process, which the shipyards believe they have the competence and experience to handle alone. The new design centres, shipyards expect, will add to their credibility.

India's second major defence shipyard --- Garden Reach Shipbuilders and Engineers (GRSE) in Kolkata --- has taken exactly the same path as MDL. GRSE Chairman, Rear Admiral TS Ganeshan says the GRSE Design Centre could be up and running within 6-9 months. He says, "We have floated a global tender, and selected one Indian IT company and one foreign shipyard, who will be our partners in this. We are in the process of formulating the shareholders' agreements with our partner companies."

Shipbuilding may also be speeded up by the MoD's plan to make each of its three shipyards --- MDL, GRSE and Goa Shipyard Ltd (GSL) --- specialise in building a particular type of warship. Currently, only MDL has the facilities to produce larger warships, like the Kolkata Class destroyers, but the smaller craft are divided up between all three yards, which reduces the incentive to specialise. MDL and GRSE both produce frigates, while the smaller vessels are distributed, depending upon current workload, between GRSE and GSL.

Now, before modernising shipyards with "modular" shipbuilding facilities, the MoD is asking an international consultant to examine which yard is suited to build which vessel. Admiral Krishnan says that, "The Secretary of Defence Production has ordered a board to be formed to bring synergy amongst the three shipyards… one consultant will recommend which shipyard should produce what. And then each shipyard will take up each section of modernisation and fund it by going to the market or fund it by themselves."

Tuesday, 4 December 2007

Rooted in Britain’s DNA is the ability to see the funny side of even the darkest situations. In college in the UK, studying military history, I couldn’t help finding endearing the perversity of a country that could lay claim to great military success, but chose instead to focus attention on a handful of military debacles. Trafalgar, Waterloo, El Alamein and Burma never received anywhere near the interest that surrounded the reverses at Gallipolli, Dunkirk and Arnhem.

And when it was time to document the history of the 1982 Falklands/Malvinas campaign, the task was not handed over to some dusty government department. Instead Whitehall called upon Sir Lawrence Freedman, one of Britain’s most distinguished historians, and a man who would surely be unsparing of the failures in that difficult conflict. I asked Freedman, then my dissertation tutor, what approach he would bring to the history. “I won’t bring an approach”, replied Freedman wryly. “I’ll just let the reader know what happened.”

In India, in contrast, compulsive governmental secrecy and a crippling fear of admitting mistakes has ensured that India’s official histories of the 1962, 1965 and 1971 wars remain confined to the almirahs of South Block. Well, not exactly. Leaks have ensured that full copies of all three histories are available on the internet, each typed page separately available in pdf format, including an introduction under the signature of then defence secretary, Mr NN Vohra.

It is in this context that, on 26th November, Defence Minister AK Antony told parliament, “A committee to review the publication of war histories, constituted by the Government, has given its recommendations. The recommendations of the committee are being considered for arriving at a final decision on the issue.” And therein hangs a tale.

In 1991, the Ministry of Defence (MoD) had okayed the publishing of all three histories --- 1962, 1965 and 1971 --- but the Ministry of External Affairs (MEA) jumped in, protesting that making public the 1962 war history would “damage relations with China”, with which the Narasimha Rao government was negotiating a border tranquillity agreement. Not to be outdone, the Home Ministry protested that making public the war histories would have “security implications.”

So a total of 75 copies of the history were typed out and distributed to senior government departmental heads, such as the home secretary, the foreign secretary, and a few instructional establishments in India. It did not take long for complaints to start coming in; the Air Force felt that it had not received its due and the MEA made its displeasure known again. So the 75 copies were treated as highly classified documents and clapped into cupboards and forgotten.

While that finished off the child, the father was handled by then Finance Minister Manmohan Singh, as he took on the job of reducing government expenditure. Amongst the first departments to get the knife --- what delicious irony --- was the History Division of the MoD, which had produced the three war histories. The distinguished Benaras Hindu University professor, Dr SN Prasad, who had been called out of retirement to oversee the exercise, went back into retirement, bemused perhaps from his first intimate contact with government.

The next chapter opened after the Kargil conflict in 1999, the only official history of which exists in the findings of a Commission of Inquiry. Mr NN Vohra, under whom the original exercise had been carried out in 1991, seized what he saw as a fresh opportunity to dust out the history. He told George Fernandes, then a defence minister burnished with the victory of Kargil (even though tarnished somewhat by the coffingate scandal allegations) that there was little sense in keeping the earlier histories from India’s patriotic public.

Mr Fernandes promptly did what ministers do when asked to take a decision. He constituted a committee to formulate recommendations on publishing the history of the 1962, 1965 and 1971 wars; the committee included Mr NN Vohra, Lt General Satish Nambiar, and Dr SN Prasad himself. It did not take long for them to recommend immediate publication. At that stage, the MEA objected again, once again taking note of China’s sensibilities. This is the committee whose recommendations Mr Antony says are being considered. This consideration has now gone on for more than five years.

This is not just a parable illustrating the government’s obsession with secrecy, or an example of how a young India is focused on the future to the almost total exclusion of its past. The sorry tale of India’s war history draft also illustrates the government’s ostrich complex, wherein documents that are freely available on the internet continue to remain classified, despite the government’s moral obligation to declassify papers after a reasonable period of time. The famous Henderson-Brooks report on the 1962 Sino-Indian conflict continues to be “top secret”, even though historian Neville Maxwell has published 90% of the report, after he migrated to Australia along with Lt Gen Henderson-Brookes.

Perhaps this has to do with our inability to learn lessons from past mistakes. Maybe it also has something to do with our inability to take criticism. It certainly shows up our inability to demand accountability from government. What is certain is that we are a long way off from asking an Indian Lawrence Freedman to write the history of one of our wars. For now, it’ll remain a well-briefed government-picked committee.

“It takes half a century to build a navy”, said India’s Chief of Naval Staff, Admiral Sureesh Mehta a year ago and he repeated that yesterday at a press conference in New Delhi. India’s smallest service, which celebrates Navy Day today, is on track to build indigenously one of the most modern navies in the Asia-Pacific region.

Much of that construction is taking place here, at the Mazagon Docks Limited (MDL) in Mumbai. Even with a host of craftsmen swarming over the four major warships that are being fitted out here, after having already been launched --- three Shivalik-class frigates and one Kolkata-class destroyer --- the ships radiate power as well as aesthetics.

India has developed a tradition of making not just capable but also beautiful warships. At a major International Fleet Review in the UK in 2005, the Duke of Edinburgh, a naval veteran himself, interrupted his schedule to compliment the INS Mysore as the handsomest warship in the review.

But the present construction facilities at MDL, and at the MoD’s other two shipyards at Goa and at Garden Reach in Kolkata, are struggling to build enough warships to make up for the decade-long hiatus from the mid-1980s, when not a single warship was ordered due to paucity of funds. In addition, the navy needs replacements for an average of five warships that complete their service lives each year. The Ministry of Defence’s (MoD’s) sharpest focus, therefore, is now on creating world-class shipyards that can churn out efficiently, the warships that the navy needs.

Vice Admiral Krishnan, the Chairman of MDL, revealed to Business Standard that a global tender is being floated for a top-class foreign shipyard that will partner India’s defence shipyards in their transformation to the “modular” form of shipbuilding. Within six months, some 8-10 global shipbuilders --- including Northrop Grumman from the US, DCN from France, Hyundai from Korea, Hyundai, and British shipbuilder, Bath Iron Works ---- will each receive a Request for Proposals (RFP) for becoming India’s partner in modular shipbuilding.

The traditional method of building warships involves building the hull and then launching it into water. Once that is afloat, hundreds of craftsmen labour for months in cramped and dangerous conditions, installing heavy equipment like engines and electronics and crawling through the ship’s innards to lay hundreds of miles of electrical cables and pipelines. In contrast, modular shipbuilding involves building the ship in huge 300-ton blocks, in the friendly conditions of a “modular workshop”. The craftsmen enjoy easier access, and once the blocks are ready, an enormous overhead “Goliath Crane” carries the 300-ton blocks to a dry dock where they are assembled into a warship.

This modular method will be used to build the navy’s next-generation warships, three futuristic Project 17-A stealth frigates. The foreign shipyard partner that wins the tender for modular construction will build one Project 17-A frigate abroad, using craftsmen from MDL and Garden Reach Shipbuilders and Engineers (GRSE) Kolkata. This will be the learning process, after which MDL and GRSE will each construct one Project 17-A frigate in their new modular shipyards.

Secretary of Defence Production, Mr KP Singh told Business Standard, “Either one or two (Project 17-A warships) will be constructed in the foreign yards, but by our men, so that they will get trained to those systems. We’ll be spending workers (on the construction)… that is the idea.”

The navy would have preferred to construct in Indian yards. Vice Admiral Birinder Randhawa, until last week the Indian Navy’s Controller of Warships Production and Acquisition, says that constructing one warship abroad is part of the price for getting the know-how for modular shipbuilding. Admiral Randhawa says, “Nobody wants to part with this technology without getting orders in their own yard.”

While modular construction could make warship building faster, the MoD and the navy are also grappling with another major bottleneck in warship building: warship design. But there’s also a plan to overcome that hurdle.

Monday, 3 December 2007

Discordant notes in the India-Russia defence relationship are accelerating India’s drive towards warship building capability. This summer, Vice Admiral BS Randhawa, the Indian Navy’s Controller of Warships Production and Acquisition, visited the Russian shipyard, Sevmashpredpriyatiye (translation: Northern Engineering Works), near the city of Archangelsk. He learned there that the aircraft carrier, INS Vikramaditya (as the Admiral Gorshkov will be renamed) would reach India not just two years later than contracted, but also at twice the cost.

Such irritants, though, could soon be in the past. Now an ambitious programme for modernising defence shipyards is going to make the Indian Navy the first of the three services to start designing and building all its major fighting platforms within India. Currently, amongst major naval powers, only the US, Russia and France build their own fleets entirely.

Before India becomes self-sufficient, Russia will get another billion-dollar order for three cutting-edge Krivak-III frigates. But the navy says that could be the last big order placed abroad. Admiral Randhawa has told Business Standard, “Ordering abroad is the last resort and the Russian order is for just 3 ships. There is no plan to order any more beyond these. We are progressing a new line of frigates at (defence shipyards) Mazagon Docks Limited, Mumbai, and Garden Reach Shipbuilders and Engineers, Kolkata.”

While four warships are being built in foreign yards (the Gorshkov and the three Krivak class frigates), 38 naval vessels are currently being built in India. The defence shipyards at Mumbai, Kolkata and Goa are building 30 warships, while, the public sector Cochin Shipyard is building the Indigenous Aircraft Carrier (IAC) and a nuclear submarine is being constructed at a facility in Vishakapatnam. Private sector yards are constructing another six survey vessels. The ships being produced in India include three cutting edge Project 15-A destroyers named the Kolkata class, and three Project 17 stealth frigates of the Shivalik class.

India’s three defence shipyards have already proved their ability to build world-class warships, but churning them out fast enough has been a bottleneck. India’s Maritime Capability Perspective Plan (MCPP), a secret document that sets out the year-wise schedule for inducting new ships into service, demands an average of five new warships each year to replace an equal number that retire annually from the Navy’s 140-ship armada, after completing their service life of about 30 years. The dockyards, so far, have managed a combined annual output of barely 3.5 vessels. This gap has, so far, been filled by imports.

Policy clarity could push output up now. After examining the American and Russian models of warship production, Admiral Randhawa says that India has implemented its own model, which is a hybrid of the two. In the US, the navy produces the basic design and then two private shipyards (e.g. Lockheed Martin and General Dynamics) compete to translate that into an actual warship. The yard that manufactures the better product is asked to build a number of ships in that series.

In Russia, there are several government-owned design bureaus, each producing a different kinds of vessel, i.e. different bureaus for destroyers and frigates, for submarines, and for aircraft carriers. Moscow decides what it needs and then simply asks the relevant design bureau to manufacture it.

In India, the Defence Procurement Policy – 2006 (DPP – 2006) now specifies how warships will be produced. Like in the US, the Indian Navy will produce the functional design. Thereafter, like in Russia, the Ministry of Defence (MoD) will nominate a defence shipyard to manufacture that series of ships.

The MoD’s next step is to modernise the three defence shipyards --- Mumbai’s Mazagon Docks Ltd (MDL), Kolkata’s Garden Reach Shipbuilders and Engineers (GRSE) and Goa Shipyards Limited --- to churn out ships quickly from those designs. And for that, an ambitious modernisation plan is about to kick off.